What is on a business electricity bill?
A UK business electricity bill is four different kinds of cost printed as one number: the energy itself, the networks that deliver it, the levies that fund energy policy, and tax. Only the first is bought from your supplier. The rest are set by distribution network operators, the National Energy System Operator, the Low Carbon Contracts Company, Elexon and HM Revenue and Customs, published in advance, and collected by the supplier on their behalf.
That is why a bill can rise on unchanged consumption, why two identical sites in different regions pay different amounts, and why most of the invoice can be checked against a published figure rather than taken on trust.
- Lines that can appear
- 17
- Distinct charges a GB business electricity invoice can itemise, before a supplier bundles any of them together.
- Climate Change Levy, per kWh
- 0.801p
- The main rate for electricity for 2026/27. It rises to 0.827p on 1 April 2027.
- When most rates reset
- 1 April
- Network and levy rates run on a charging year from April to March, and are published months ahead of it.
Four kinds of cost, one number
Almost every complaint about business energy bills comes from treating the total as one thing. It is not. It is four, and they behave completely differently.
1. The energy
What the electricity itself cost to buy on the wholesale market, plus whatever margin and risk premium your supplier has priced in. This is the part your contract actually negotiates, and on many business bills it is no longer the largest part.
2. The networks
The cost of the wires. Distribution charges pay for the local network that runs from the grid supply point to your meter, and are set by the distribution network operator for your region. Transmission charges pay for the high voltage network that moves power across the country, and are set nationally but vary by location: the further a site sits from generation, the more it pays. Balancing charges pay for keeping supply and demand matched in real time.
3. The levies
Government energy policy, collected through the bill rather than through taxation. Contracts for Difference support low carbon generation, the Capacity Market pays for capacity to be available when the system is tightest, and the Nuclear Regulated Asset Base levy funds new nuclear construction while it is being built. The Renewables Obligation and the Feed-in Tariff are closed to new entrants but still being paid for.
4. The taxes
The Climate Change Levy, charged per kWh, and VAT on top of everything else including the Climate Change Levy. Both are HMRC, not industry, and both have reliefs a business can qualify for.
The practical consequence is that your supplier controls one of the four. Changing supplier changes the first category and almost nothing else, which is the single most useful thing to understand about a business energy bill.
Every line, and who sets it
This is every charge that can appear on a GB business electricity invoice. Not every bill shows all of them, and many suppliers bundle several into one combined line, which is legal and makes the bill harder to check.
| Line on the bill | What it pays for | Who sets the rate | Where it is published |
|---|---|---|---|
| Unit rate | The energy, per kWh. Flat, or split by time of day on a time-of-use tariff. | Your supplier | Your contract |
| Standing charge | Costs that exist whether or not you consume, per day. | Your supplier | Your contract |
| Metering | Meter operation, data collection and data aggregation, per day. Often three separate lines. | Your supplier and meter operator | Your contract |
| DUoS | The local distribution network. Unit rates that vary by time band, plus a daily charge. | Your distribution network operator, under the DCUSA | The annual charging statement for your network area |
| Capacity | The maximum demand your site has reserved, per kVA per day, used or not. | Your distribution network operator | The annual charging statement for your network area |
| Reactive power | Demand that loads the network without doing useful work, per kVArh above an allowance. | Your distribution network operator | The annual charging statement for your network area |
| TNUoS | The national transmission network. Locational, so it varies by where the site is. | NESO, under the CUSC | NESO final tariffs, published ahead of each charging year |
| BSUoS | Keeping the system balanced in real time, per kWh and varying by half hour. | NESO | NESO, fixed in advance of the period it applies to |
| AAHEDC | Subsidising distribution costs in the north of Scotland, per kWh, nationally. | NESO | The NESO tariff for each charging year |
| CfD Supplier Obligation | Contracts guaranteeing low carbon generators a fixed price, per MWh. | Low Carbon Contracts Company | The quarterly Interim Levy Rate, then a reconciled daily rate |
| Capacity Market | Capacity paid to be available, per MWh of demand in winter peak periods only. | Set under the Capacity Market Rules, settled by EMRS | Determinations published before and after each delivery year |
| Nuclear RAB | New nuclear construction, per MWh, revised quarterly. | Low Carbon Contracts Company | Quarterly rate determinations |
| Renewables Obligation | Large scale renewable generation, per kWh. Closed to new generation, still being paid. | Obligation level set by government, administered by Ofgem | The annual obligation level and buy-out price |
| Feed-in Tariff | Small scale renewables under the closed FiT scheme, per kWh. | Administered by Ofgem | Quarterly levelisation |
| Imbalance and RCRC | The difference between contracted and actual volumes, settled per half hour. | Elexon, under the Balancing and Settlement Code | Elexon settlement data, per settlement period |
| Climate Change Levy | A tax on business energy use, per kWh. | HM Revenue and Customs | GOV.UK, changing each 1 April |
| VAT | Applied to the whole bill including the Climate Change Levy. | HM Revenue and Customs | GOV.UK |
Two things in that table surprise people. The first is how many separate bodies set a price on a single invoice: seven, before your supplier has added anything. The second is the last column. Almost every one of these rates is published, in advance, by name. A business electricity bill is one of the few invoices you receive where most of the arithmetic can be independently reproduced.
How the total is assembled
Every line resolves to one of four shapes. Once you can see which shape a line is, you can check it.
Unit rates, DUoS unit charges, AAHEDC, BSUoS, the Climate Change Levy and most levies.
Standing charges, metering, and the fixed elements of network charges. Charged whether the site ran or not.
Capacity charges, against the agreed capacity on record with the network operator rather than what you used.
The fourth shape is the one that catches people: a rate applied to a restricted window rather than to everything. The Capacity Market Supplier Charge is the clearest example. It is a rate per MWh, but it applies only to consumption in specific half hours on working days between November and February. A site that shifts load out of that window pays less without consuming less.
There is one more complication worth knowing before you check anything. Several charges are not applied to the kWh on your meter, but to that figure grossed up for the electricity lost as heat in the network between the grid supply point and your site. The multiplier is the line loss factor, it varies by network, voltage and time of day, and it means a hand calculation against metered volume alone will come out a few percent light. That is expected, not an error.
What the levies actually cost
Network charges depend on region, voltage and demand shape, so they need their own guides. The levies do not. They are single national rates, so they can be shown exactly. Below is what they come to for a site consuming one million kWh in a year, at the rates published for 2026/27.
- Consumption assumed
- 1,000,000 kWh
- Climate Change Levy at 0.801p/kWh
- £8,010.00
- AAHEDC at 0.044269p/kWh
- £442.69
- CfD Supplier Obligation at £10.559/MWh
- £10,559.00
- Nuclear RAB at £4.683/MWh
- £4,683.00
- Total, before networks and before VAT
- £23,694.69
Two things are worth taking from this. The first is that roughly twenty four thousand pounds a year, on a site of that size, is set by nobody you can negotiate with. The second is that every one of those four numbers came from a published document, and so can be checked.
Why a bill rises when usage does not
This is the most common question about business energy, and it usually has one of five answers. None of them involve the supplier changing its price.
- The charging year turned over. Network and levy rates reset every 1 April. Transmission charges rose sharply for 2026/27, and distribution charges are reset annually by each network operator independently.
- A new levy started. The Nuclear RAB levy began appearing on electricity bills from December 2025. It was not on a bill for the same period a year earlier.
- The billing period is longer. Daily charges scale with days, not usage. A 31 day period costs more in standing, metering and capacity charges than a 28 day one, on identical consumption.
- A reconciliation landed. Several charges are billed at an interim rate and trued up later. A reconciliation for a period you have already paid for is normal, and it can be large.
- The shape of demand changed. Consuming the same total at different times of day costs more if more of it landed in a red distribution band or a winter peak period.
Only the last of these is inside your control, and it is the one people look at least.
How to check it
A spot check on the unit rate proves very little, because the unit rate is the part of the bill least likely to be wrong. Errors concentrate in the parts nobody reconstructs. In practice they fall into six groups, and it is worth working through them in this order, because a failure early on invalidates everything after it.
- Identity. Is this invoice for the meter, site and contract you think it is? A bill validated against the wrong contract can be arithmetically perfect and completely wrong.
- Period. Do the dates match the period billed, and does that period abut the last one without a gap or an overlap?
- Consumption. Does the volume billed match the meter data, and is it actual rather than estimated?
- Rates. Does each rate match the contract, or for a pass-through charge, the published figure for that charging year and that network area?
- Arithmetic. Does rate times quantity equal the line, and do the lines equal the total?
- Credits and adjustments. Are reconciliations, credits and re-bills for the right period at the right rate?
The reason to work in that order is causal. If the consumption figure is wrong, every rate applied to it produces a wrong line, and the arithmetic will still check out. Finding the arithmetic error first tells you nothing about why the bill is wrong.
What is changing
Three changes affect bills issued in the current charging year.
VAT on qualifying electricity supplies goes to zero
From 1 October 2026 to 31 March 2027, the 5% reduced rate on qualifying electricity supplies is temporarily removed. This matters to fewer businesses than the headline suggests. It applies to supplies already eligible for the reduced rate: charities, residential care homes, and small supplies under the de minimis threshold of 33 kWh per day or 1,000 kWh per month at a single premises. A business paying the standard 20% is unaffected, and a VAT registered business reclaiming input VAT sees no cash difference either way.
The Climate Change Levy rises again in April
The main rate for electricity is 0.801p per kWh for 2026/27 and rises to 0.827p from 1 April 2027. A Climate Change Agreement gives a 92% discount on the electricity rate for participating sectors.
Transmission charges are rising steeply
Transmission network charges rose materially for 2026/27, and the increase is not evenly spread: it is locational by design, so some regions saw far larger movements than others. For a half-hourly metered site this is often the single largest year-on-year change on the bill.
Deep dives and edge cases
The main path above covers the bill most businesses receive. These are the cases that come up often enough to answer, but not often enough to interrupt it.
Half-hourly and non-half-hourly sites are billed differentlyWhy a larger site sees charges a smaller one never does.＋
A half-hourly metered site records consumption in each half hour and is settled on that actual data. That is what makes time-of-use distribution bands, capacity charges, reactive power charges and winter peak levies possible, and it is why a half-hourly bill has more lines on it.
A non-half-hourly site has historically been settled against an estimated profile for its class rather than actual half-hourly data. The industry programme moving every meter point onto actual half-hourly settlement changes that, and with it how time-varying charges reach smaller bills.
A combined non-commodity line cannot be checked properlyWhat to do when the invoice shows one number for everything.＋
Where a supplier bundles the network and policy charges into a single line, that line can only be verified in total. An overcharge on one component can sit underneath an undercharge on another and the sum will look right.
You can request the breakdown from your supplier in writing. For businesses claiming network charge compensation under the energy intensive industries scheme, obtaining that detail is explicitly the responsibility of the applicant rather than of the scheme administrator, which is covered in the EII exemption guide.
Fixed contracts still contain these chargesA fixed price is not a price that cannot move.＋
On a fully fixed contract the non-commodity charges are wrapped into the unit rate at a level agreed up front, and the supplier carries the risk that they rise. That risk is priced, so a fixed contract is not free of these costs, it has pre-paid an estimate of them plus a premium.
Most business contracts are not fully fixed. Many fix the energy and pass through the rest, which is why a bill on a fixed contract can still change when the charging year turns over. What is fixed, and what is not, is a term of the contract rather than a property of the word.
Reliefs, and what each one actually removesEII, Climate Change Agreements and reduced-rate VAT do different things.＋
They are frequently confused, and they are not alternatives to each other. A Climate Change Agreement discounts the Climate Change Levy, which is a tax. An energy intensive industries certificate removes a certified proportion of four policy levies, and never the Climate Change Levy. Reduced-rate VAT applies to qualifying use or small supplies, and a supply charged the reduced rate of VAT is outside the Climate Change Levy entirely.
Questions
Why has my business electricity bill gone up when my usage has not?＋
Because most of the bill is not the energy. Network and policy charges are reset every 1 April by the network operators, NESO and government, and they move independently of what you consume. Transmission charges in particular rose sharply for 2026/27. A bill can go up several percent on unchanged consumption without your supplier changing anything.
What are non-commodity charges?＋
Everything that is not the wholesale cost of the energy: distribution and transmission network charges, balancing charges, government levies and market operation costs. They are set by distribution network operators, NESO, Ofgem and government rather than by your supplier, who collects them and passes them on. On most business bills they are a large share of the total.
Do I pay VAT on business electricity?＋
Usually 20%. The reduced rate applies to qualifying use, which includes domestic and charity non-business use, and to small supplies: no more than 33 kWh per day or 1,000 kWh per month at one premises. That threshold is per premises, not per business, so a company with several small sites can qualify at each one separately.
Does the October 2026 electricity VAT cut apply to my business?＋
Only if you already pay the reduced rate. From 1 October 2026 to 31 March 2027 the 5% rate on qualifying electricity supplies goes to 0%, which covers charities, residential care homes and small businesses under the de minimis threshold. A business paying the standard 20% is unaffected, and a VAT-registered business reclaiming input VAT sees no cash difference either way.
What is the Climate Change Levy and can I avoid it?＋
It is a tax on business energy, 0.801p per kWh of electricity for 2026/27, rising to 0.827p from April 2027. You cannot opt out, but three routes reduce it: a Climate Change Agreement gives a 92% discount on electricity, supplies already charged the reduced rate of VAT are outside it entirely, and electricity used in mineralogical and metallurgical processes is exempt. An EII certificate is not one of them, despite being widely assumed to be: it removes a share of the CFD, Renewables Obligation, Feed-in Tariff and Capacity Market costs, and leaves the Climate Change Levy untouched.
What is a standing charge, and why do I pay it when the site is closed?＋
It recovers costs that exist whether or not you consume anything: the connection, the meter, and the fixed portion of network costs. It is charged per day for every day of the billing period. A site that shut for a month still owes its standing charge, its capacity charge and, on most contracts, the fixed part of its network charges.
Why is there a capacity charge when I never reached that demand?＋
Capacity is reserved, not consumed. You pay per kVA per day for the maximum demand your site has contracted with its distribution network operator, whether or not you use it. Capacity set well above real peak demand is one of the most common recurring overcharges, and it is reducible: the network operator can lower an agreed capacity on request.
What is the difference between a fixed and a pass-through contract?＋
A fixed contract wraps the non-commodity charges into your unit rate at a price agreed up front, so the supplier carries the risk that they rise and prices that risk in. A pass-through contract bills them at cost as they are incurred. Pass-through is often cheaper and always more volatile, and it makes checking the bill considerably more important.
Can a supplier bill me for a charge from two years ago?＋
For business supplies, yes. Several charges are billed at an interim rate and reconciled once the real figures are settled, sometimes long afterwards: the Capacity Market, the Contracts for Difference levy and half-hourly settlement all work this way. A reconciliation line on a current invoice is normal. Whether the amount is right is a separate question from whether it is allowed.
Which charges can I actually reduce?＋
Reactive power, by correcting power factor. Capacity, by asking the network operator to lower an agreed capacity the site never reaches. Time-of-use distribution charges, by shifting demand out of the red band. Transmission charges, by cutting demand at winter peaks. The levies and the taxes are fixed per unit, so the only lever on those is consuming less or qualifying for a relief.
Why does an identical site in another region pay a different rate?＋
Because distribution charges are set per network area by that area's operator, and transmission charges are locational by design: the further a site sits from generation, the more it pays. Two sites with identical meters and identical consumption can carry materially different network costs purely because of where they are.
My bill shows one combined non-commodity line. Is that allowed?＋
Yes, and it is common. It also means the line can only be checked in total, so an overcharge on one component can hide under an undercharge on another. You can ask your supplier in writing for the breakdown, and for energy-intensive businesses claiming network charge compensation, obtaining that detail is the applicant's responsibility rather than the scheme administrator's.
Every line, rebuilt from the published rate.
Simplest Energy reconstructs each charge on an invoice from the source that sets it, then compares the result against what you were billed.
- Distribution, transmission, balancing and levy charges rebuilt from the published rates for the charging year and network area
- Line by line comparison of the rebuilt invoice against the billed one
- Six grouped checks computed in causal order, so a failure reports its root cause
- Pricing the per-customer allocation of imbalance costs, which is contract-specific and today is held for confirmation
- A public source for RCRC, which is not published and today comes from settlement statements
Built from the primary document.
Climate Change Levy rates
Fuel and power (VAT Notice 701/19)
Government removes VAT from electricity bills from 1 October 2026
Transmission Network Use of System (TNUoS) charges
Final TNUoS tariffs for 2026/27
What costs make up an electricity bill?
- Last reviewed
- 5 August 2026
- Technical basis
- Published 2026/27 charging year rates, checked 5 August 2026
- Review trigger
- The 1 April 2027 charging year, the end of the temporary electricity VAT zero rate on 31 March 2027, or a new levy appearing on bills.
This guide explains how charges are set and calculated. It is not tax, legal or procurement advice, and the rates quoted are those published for the 2026/27 charging year at the date of review. Check the linked source before relying on a figure.